5 Top Multibagger Biotech Stocks To Buy In The 2nd Half

After a dreadful 2016, biotech stocks have sprung back to life this year as possibilities of a draconian crackdown on drug prices ease out. The unveiling of a health care refurbish plan by Senate Republicans, in the meanwhile, has reinstated investors’ confidence in the Republicans’ ability to achieve another major legislative reform related to tax.

President Trump has promised to change the tax code so that companies can bring back cash held overseas. This in turn is expected to spur a series of buyouts among innovation starved biotech companies looking for growth. Hence, investing in solid biotech stocks that are poised to give returns that are several times their cost seems to be judicious.

The Best Way to Beat the Market: Buy Biotech Stocks

Biotech stocks have been hot of late, with the SPDR S&P Biotech ETF (MX:XBI) hovering around its annual high. In fact, the month of July has been the best for XBI, historically. According to recent data from Schaeffer's Quantitative Analyst Chris Prybal, XBI has averaged a monthly gain of 5.4% in July. Also, watch out for Health Care Select Sector SPDR Fund (XLV), which ended higher in July, 80% of the time in the last decade.

Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) , Regeneron Pharmaceuticals Inc (NASDAQ:REGN) and Celgene Corporation (NASDAQ:CELG) are some of the biotech stocks that have given stellar returns during the third quarter and second half of the year, historically. While Alexion Pharmaceuticals averages a third-quarter gain of 16.2%, its shares averaged a gain of 26.17% in the second half of the year. Regeneron Pharmaceuticals boasts an average gain of 19.03% for the third quarter and a 27.06% second-half gain, which is incidentally the second best of the S&P 500 members. Celgene has averaged a third-quarter gain of 11.7%, and a second-half gain of 12.98%.

Biotech stocks have already doubled the gains of the Dow Jones this year. The Nasdaq Biotechnology Index (IBB) soared over 16%, while the blue-chip index gained around 8%. IBB is expected to move north, as biotech sales are projected to increase from $107 billion this year to $128 billion by 2019, as per FactSet. This means consumers will be buying 20% more drugs by 2019.

Drug Pricing Woes Ebb

The biotech sector has come alive and there is perfect reason for this. Investors have, lately, started to feel that high drug pricing issues won’t be as damaging as feared during the presidential election last year. Fears that price control could be put in place have restrained investors from making big bets on biotech companies.

Moreover, politicians are likely to crack down on products that are visible to consumers like EpiPen. We shouldn’t forget that such a product is relatively cheap compared to some of the expensive specialized therapies. Furthermore, the pharma industry did a commendable job by showing politicians that drug costs constitute a relatively small portion of overall healthcare expenses. At the same time, they have argued that expensive drugs can save money by eliminating chronic diseases and keeping people out of hospitals.

Republican Healthcare Bill: Shot in the Arm for Drug Makers

Senate Republicans’ unveiling of the Healthcare Bill was also a shot in the arm for drug companies, as they hope that the much-awaited tax reforms will get implemented (read more: Original post

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Written By: Zacks Investment Research